Passionate Pursuit of Purpose

Perfect questions

How to increase your minimum wage!

Posted by on Feb 11, 2014 in Character Development, Finding Destiny, Perfect questions, Personal Finance | 1 comment

How to increase your minimum wage!

First the impact of raising the minimum wage for everyone:

1.    You will have fewer jobs:now hiring

Most minimum wage jobs are basic entry level jobs. These jobs require little training or specialized skills.

Which means; when the labor costs gets to a certain level; companies can often develop a machine to replace that job.  (PS the machine rarely takes breaks, doesn’t need days off, no health insurance). Some jobs will be replaced by automated systems and machines.  Fewer jobs for those with little training or skills.

How many baggers do you see at your grocery store these days?  How often do you self-scan your items? How often do you hear an automated response when you call a company?  Companies found a way to design away the jobs.

How many Cashiers does Amazon have?

2.    People have less incentive to improve themselves.

If your minimum wage is $11 to $15 per hour some people will be satisfied with that income level and not do technical training that makes them more valuable to society.

Every day we each rely on millions of people to make our lives more convenient and enjoyable.  Many of these people you will never see, and yet their contribution to our lives is vital.  The more skills and education people have the more they can contribute to the rest of us.

So, please go out and be the best “you” you can be, it will bless the rest of us.

3.    Your burger will get more expensive:

That increase in labor cost has to be passed onto the consumers.  It will increase inflation.  Prices of products increase and this will especially hurt those most sensitive to these price changes.  Those most sensitive to price changes are often the same who the minimum wage increase is designed to help.

The cost of living will rise and people will again scream for another increase to the minimum wage. The cycle and situation will remain the same…

So, What is the solution?

Minimum wage jobs are not designed to be a career.  They are a starting point not the finish line.

Here are 3 idea for increasing your minimum wage:

    • Education:  This doesn’t have to be a traditional college so here are some other options
      • Technical school, there are great programs for becoming a better you in several fields.
      • Apprenticeship, some of these are formal, or you can also find that talented local person who will train you in an informal process through experience.\
      • Military: most jobs in the military don’t involve carrying a rifle every day. They train you with real world skills that will transfer to your life after the military
    • Entrepreneurship: this is finding a need and filling it by providing a product or service.  Instead of looking for a job look for a way to serve others. If you looking for a way to get started try Dan Miller’s 48 low cost business ideas.(Affiliate LInk)
  • Persistence: If there is a position you want, keep pursuing it.  Then once you get it, keep pursuing and working hard.

“When you do more than you get paid for eventually you’ll be paid for more than you do.”- Zig Ziglar

Comment below: tell us what other ways people can increase their minimum wage?

 

Facebooktwittergoogle_plusredditpinterestlinkedinmail Read More

Doing your taxes is as easy as managing your fantasy football team?

Posted by on Jan 23, 2014 in Perfect questions, Personal Finance | 4 comments

Doing your taxes is as easy as managing your fantasy football team?

1040One of the DIY tax programs describes doing your own taxes “as easy as managing your Fantasy football team.”  This may or may not be true depending on 3 factors:

1.    How good of a Fantasy Manager are you?

2.    How complicated your Tax situation is?

3.    How much time you plan on investing in your tax education?

How good are you?

I play in 3 fantasy leagues and I am a mediocre manager.  I spend probably 1 to 2 hours per week during the season reading news.  Then I listen to sports radio and watch 3 to 5 games each week.

During the 15 week season, I spend about 12 hours each week on football related education.  Not including listening to sports radio while driving.  I suspect the better managers spend even more time.  And the worst, ignore their teams, have guys on byes in the starting roster and finish last, and probably spend almost no time.

It is probably not a linear relationship and there is a lot of luck.  However, the more time you spend the greater your chances of winning your league.

How Complex are your taxes?

If you have no kids, don’t own your home, and your only income is from a w-2 job… File your own.  Your difficulty level does compare to “installing a light bulb, or being a bad fantasy manager.”  Easy peazy!

It is amazing how often smart people miss things deductions on their tax return.  Or deduct things that could get them in hot water with the IRS.   Just because you are smart at your specialty, doesn’t mean you will prepare your taxes correctly.  It seems our government enjoys changing the tax rules and adding lots of new ones.

How much time are you going to spend learning about taxes?

I spend about 180 hours per year on my football education.  Thanks to that I am a mediocre fantasy manager.  I spend around 1500 hours each year learning and preparing taxes.  I am a very good preparer, and constantly getting better.  Let a professional’s experience work for you.

Yes I know this article may seem self-serving, and it is because I want to serve you.  I want your taxes done correctly.  I want to see you become wealthier each year.

Last year over 55% of my clients paid less than $95 to have a professional prepare their taxes.  Let me help you file your return with confidence.   Learn more about my tax preparation services here!

Facebooktwittergoogle_plusredditpinterestlinkedinmail Read More

The Looming Bitcoin collapse

Posted by on Dec 10, 2013 in Perfect questions, Personal Finance | 0 comments

The Looming Bitcoin collapse

“Bitcoin is the currency of the future.”  “The first first ever fully decentralised payment network on the planet (and still the strongest), moving billions of dollars of value every day with no fees.”  “There has never been anything like this before.”  This is the rhetoric of Bitcoin evangelists. Is it true?

Are these worth a years salary?

Are these worth a years salary?

I remember hearing about “the new economy” and how internet companies would change the world and make investor rich (Dot com bubble).  In the 1630’s, one tulip bulb in Holland became worth an entire years earning for a wealthy merchant.  Human history is littered with obscene and unrealistic valuations for various currencies, commodities, or securities.

Money is a tool used to simplify a transaction between 2 or more parties.  It is a recognized store of value.   It can have intrinsic value such as Gold or silver, or it can be a fiat currency.  Almost all currencies today are Fiat currency and are backed by a government that has a vested interest in the long term value of that currency.  Bitcoin has none of this (read what Alan Greenspan thinks here).

Fiat currencies usually deflate in value over time, (causing inflation in the prices to purchase goods and services with those currencies).  Slow, controlled, and consistent inflation over time has some economic advantages.  However, sometimes currencies depreciate rapidly causing hyperinflation.

Zimbabwe $100,000,000,000,000 Now worth nothing.

Zimbabwe $100,000,000,000,000 Now worth nothing.

Hyperinflation is a very real risk of Fiat currencies. In Zimbabwe everyone was trillionaires.  Although now those trillion dollar notes are worth nothing (except as a collector item).  Zimbabwe no longer has its own currency, it uses U.S. Dollars.  (Currencies that went to zero)

Bitcoin is a virtual fiat currency.  There is a growing group of people who use it as money.  Some vendors are even beginning to accept it as payment for goods and services.   The value of a bitcoin has exploded over the last few months and seems to be growing at an accelerating rate.

  • Why is this happening?

  • Why do people feel the need to use this currency?

Markets are driven by 5 things: 3 are actual and 2 are perceived:

  1. Supply: how much of the product is available.
  2. Demand: How much people want of a product
  3. Price: impacts demand and how much is supplied
  4. Fear:  people hate to lose what they have.
  5. Greed:  People want to make money without having to invest something in return.

What is driving Bitcoin?

Bitcoin is being driven by fear and greed.  The interesting thing is fear and greed are both driving the price up.
Some people buy Bitcoin because they fear their national currency (or several national currencies) will become worthless.  Which is a valid fear based on the national debt loads of several western nations.

Is Bitcoin the right investment if you fear your national currency becoming worthless?

Some are buying it to make money because it is the wave of the future.  Some believe the price will go up for a long time as everyone converts to it.  They want to buy early and become a Bitcoin millionaire.

Why the bubble will burst?

It has no intrinsic value.  You can’t eat it or use it to produce something.  It is not regulated and backed by a government that regulates the creation of the currency.

When the factory workers and the school teachers start buying them; I could see the value of a Bitcoin reaching $50,000.   Everyone will tell me how wrong I am.

Then…  History will repeat itself.  The Bitcoin will disappear except for case studies and history books.  It will be of no value.  But do not fear, in the day and age of the worldwide marketplace… another bubble shall take its place.  That bubble will be driven by fear and greed too.

Are you buying Bitcoins?

 

Facebooktwittergoogle_plusredditpinterestlinkedinmail Read More

Is your money Lazy? (The power of compounding)

Posted by on Jun 27, 2013 in Finding Destiny, Perfect questions, Personal Finance | 2 comments

Is your money Lazy? (The power of compounding)

In Wealth creation pt 1 we discussed the accumulation of bricks of abundance.  In The Power of a Seed we discussed how planting our seed (Asset) produces a harvest.

Compounding: the concept of reinvesting our harvest.  How reinvesting your returns from investments grows your assets.

Here is an example of the basic concept.
You spend $1000 on a bond that  pays 10%/year

Year Year Interest Total Interest Balance
1 $ 100.00 $ 100.00 $ 1,100.00
2 $ 110.00 $ 210.00 $ 1,210.00
3 $ 121.00 $ 331.00 $ 1,331.00
4 $ 133.10 $ 464.10 $ 1,464.10
5 $ 146.41 $ 610.51 $ 1,610.51
6 $ 161.05 $ 771.56 $ 1,771.56
7 $ 177.16 $ 948.72 $ 1,948.72
8 $ 194.87 $ 1,143.59 $ 2,143.59
9 $ 214.36 $ 1,357.95 $ 2,357.95
10 $ 235.79 $ 1,593.74 $ 2,593.74
11 $ 259.37 $ 1,853.12 $ 2,853.12
12 $ 285.31 $ 2,138.43 $ 3,138.43
13 $ 313.84 $ 2,452.27 $ 3,452.27
14 $ 345.23 $ 2,797.50 $ 3,797.50
15 $ 379.75 $ 3,177.25 $ 4,177.25
16 $ 417.72 $ 3,594.97 $ 4,594.97
17 $ 459.50 $ 4,054.47 $ 5,054.47
18 $ 505.45 $ 4,559.92 $ 5,559.92
19 $ 555.99 $ 5,115.91 $ 6,115.91
20 $ 611.59 $ 5,727.50 $ 6,727.50

In 20 years your $1,000 has increased to over $6,700 and you will earn $670 in the next year.  In year one notice it was only $100.  That movement from $100 to $670 is compounding in action.

If you consumed(spent) that $100 each year, you would only earn $100 each year.

In our next example let’s say we invest an average American car payment each month in addition to that initial $1,000 investment. (We are using $350 for car payment as the average ranges from $300 to $550 per month)

Year Year Deposits Year Interest Total Deposits Total Interest Balance
1 $ 4,200.00 $ 324.19 $ 5,200.00 $ 324.19 $ 5,524.19
2 $ 4,200.00 $ 776.61 $ 9,400.00 $ 1,100.79 $ 10,500.79
3 $ 4,200.00 $ 1,274.27 $ 13,600.00 $ 2,375.06 $ 15,975.06
4 $ 4,200.00 $ 1,821.69 $ 17,800.00 $ 4,196.76 $ 21,996.76
5 $ 4,200.00 $ 2,423.86 $ 22,000.00 $ 6,620.62 $ 28,620.62
6 $ 4,200.00 $ 3,086.25 $ 26,200.00 $ 9,706.87 $ 35,906.87
7 $ 4,200.00 $ 3,814.87 $ 30,400.00 $ 13,521.74 $ 43,921.74
8 $ 4,200.00 $ 4,616.36 $ 34,600.00 $ 18,138.11 $ 52,738.11
9 $ 4,200.00 $ 5,498.00 $ 38,800.00 $ 23,636.10 $ 62,436.10
10 $ 4,200.00 $ 6,467.80 $ 43,000.00 $ 30,103.90 $ 73,103.90
11 $ 4,200.00 $ 7,534.58 $ 47,200.00 $ 37,638.48 $ 84,838.48
12 $ 4,200.00 $ 8,708.04 $ 51,400.00 $ 46,346.52 $ 97,746.52
13 $ 4,200.00 $ 9,998.84 $ 55,600.00 $ 56,345.36 $ 111,945.36
14 $ 4,200.00 $ 11,418.72 $ 59,800.00 $ 67,764.08 $ 127,564.08
15 $ 4,200.00 $ 12,980.60 $ 64,000.00 $ 80,744.67 $ 144,744.67
16 $ 4,200.00 $ 14,698.66 $ 68,200.00 $ 95,443.33 $ 163,643.33
17 $ 4,200.00 $ 16,588.52 $ 72,400.00 $ 112,031.85 $ 184,431.85
18 $ 4,200.00 $ 18,667.37 $ 76,600.00 $ 130,699.22 $ 207,299.22
19 $ 4,200.00 $ 20,954.11 $ 80,800.00 $ 151,653.33 $ 232,453.33
20 $ 4,200.00 $ 23,469.52 $ 85,000.00 $ 175,122.85 $ 260,122.85

In this example over 20 years we have invested $85,000 and the current value is over $260,000. Your investment of just $4,200/per year has become a potential income of $23,500 per year.

Here we are compounding our investment by continually adding to it from other sources.  This is the idea behind saving for retirement. You can create your own custom calculation here.  It is a great way to determine how you can get to your desired saving when you enter into retirement.

Now, to really see the amazing power of compounding; let’s change your percentage return.  Instead of mutual funds or bonds, what if we are investing in something with more potential.  Maybe it is an investment, where we combine our money with our energy.  Creating returns of 50% or more.  It is the Power of Seed in action.

What if you average 50%per year on your money and you reinvest that?  Maybe it is flipping houses, flipping cars, making jewelry or clothing.  What is your passion?  If you turned off the T.V. and used your time and talent what could you make?

Let’s take that $1,000 and invest in a “riskier” asset. (In these types of activities the main risks are risk you can control.  This means the risk depends on how wise the investor is).  Could you use $1,000 and find a way to make $500 this year?

Year Year Interest Total Interest Balance
1 $ 500.00 $ 500.00 $ 1,500.00
2 $ 750.00 $ 1,250.00 $ 2,250.00
3 $ 1,125.00 $ 2,375.00 $ 3,375.00
4 $ 1,687.50 $ 4,062.50 $ 5,062.50
5 $ 2,531.25 $ 6,593.75 $ 7,593.75
6 $ 3,796.88 $ 10,390.63 $ 11,390.63
7 $ 5,695.31 $ 16,085.94 $ 17,085.94
8 $ 8,542.97 $ 24,628.91 $ 25,628.91
9 $ 12,814.45 $ 37,443.36 $ 38,443.36
10 $ 19,221.68 $ 56,665.04 $ 57,665.04
11 $ 28,832.52 $ 85,497.56 $ 86,497.56
12 $ 43,248.78 $ 128,746.34 $ 129,746.34
13 $ 64,873.17 $ 193,619.51 $ 194,619.51
14 $ 97,309.75 $ 290,929.26 $ 291,929.26
15 $ 145,964.63 $ 436,893.89 $ 437,893.89
16 $ 218,946.95 $ 655,840.84 $ 656,840.84
17 $ 328,420.42 $ 984,261.25 $ 985,261.25
18 $ 492,630.63 $ 1,476,891.88 $ 1,477,891.88
19 $ 738,945.94 $ 2,215,837.82 $ 2,216,837.82
20 $ 1,108,418.91 $ 3,324,256.73 $ 3,325,256.73

Your $1000 becomes 3.3 million in 20 years…  most likely at some point in this you will need to bring on the energy/time of another person or more.  This is basically concept of how Michael Dell started.  Building computers in his garage and expanding until he was one of the largest computer manufactures in the world.

Tell your Money to get a JOB

A business doesn’t grow in a straight line like our example.   It will have ups and downs.  One business or idea may reach a saturation point.  At that point to earn the large returns; we may have to take the new earnings and find alternative investments or new businesses.

Compounding is the basis of the concept “it takes money to earn money.”  Once you have accumulated those bricks of abundance, your money can work in addition to you working.  Your money doesn’t have to be lazy.  It can have a J-O-B.

What J-O-B does your money have?

Is your money lazy?

Facebooktwittergoogle_plusredditpinterestlinkedinmail Read More

How to Select your Insurance Company.

Posted by on Apr 17, 2013 in Perfect questions, Personal Finance | 2 comments

How to Select your Insurance Company.

insurancelogosHow insurance conceptually works.

The insurance companies collect premiums in advance to cover certain risks.  The risks covered and the liability limits are defined in the declaration of coverage.  With these collected premiums the insurance company then pays current claims and other expenses (such as advertising).  The remaining balance of premiums is invested and held in reserve for future claims.

Basic Insurance Company Income Statement:

Income
Revenue from Premiums _____________
Income from investment of Reserves _____________
Total Revenue ________________
Expenses

Customer Acquisition

_____________
Payment of Claims _____________
Overhead _____________
Total Expenses ________________

 

 

Insurance companies fall into two main groups:

  1. For Profit (These have owners who expect a return for their investment): State Farm, Allstate, Progressive, Geico,
  2. Cooperatives, or Mutuals (These don’t have owners, the policy holders are the stakeholders): USAA, Nationwide, Hastings, most Farm Bureaus

Theoretically the Mutual companies should be of greater value to customer, as the customer are the owners.  However, profits are only one component of the various factors that determine total value to the insured.  I am not for or against either type of insurance company and you can find great value in either type of corporate structure.

Now we will go through each line of the income statement and discuss the strategies implemented by those insurance companies

Premiums:
Several companies utilize a core marketing strategy that focuses on the lowest price for their policies.  Progressive utilizes this strategy the most.  They encourage you to compare rates (although it is not a simple process). Usually they are the lowest priced option (perhaps you are getting what you pay for?). This is a great marketing strategy, hoping the consumer views it an apples to apples comparison.

Not all apples taste the same.  Just like there are several attributes to creating a great tasting and nutritious apple.  There are other attributes that reveal the total cost of your insurance not just your upfront premium.

Investment returns on reserves
As a general rule the investment returns are relatively similar for different companies.  However, are those returns utilized to provide more value to the customer, paying shareholders, or paying one of the other expenses discussed below.

Note: Warren Buffet uses insurance reserves to fund many of his investments through Berkshire Hathaway (owner of Geico and several other insurance companies).

Customer acquisition costs
Traditionally all insurance companies would work through insurance agents. However, that has changed over the last couple of decades. Several companies now offer you the option to buy directly from them via the internet or over the phone.

Agents:
There are two types of agents Independent and captive.  A captive agent sells the products of one company.  All State, Farmers, and State Farm are good examples of this strategy.  Independent agents represent several companies in each category of insurance they provide.

Components of Acquisition costs:

  • Agents or staffs to handle direct sales
  • Advertising (all those ads at our favorite sporting events are not free)
  • The more they spend on advertising the less they can spend somewhere else

Claims expense
This entails all components of paying a claim such as:

  • Cost of the adjustor
  • Cost of the staff to process claims
  • Fraud (some people file fraudulent claims some companies can be more susceptible to this which raises their costs)
  • Legal defense fees (when those attorney’s you see on TV sue to get more money)

    One of my Favorite Insurance companies

    One of my Favorite Insurance companies

So far in my life I have experience 5 different companies insurance claims process.  I was very satisfied with several of them.  However, my experience with Progressive was awful.  They paid me wholesale value for my car, and were very nasty and rude throughout the process.  In comparison my experiences with All State and Hastings were phenomenal.  They made frustrating situation as easy as possible for me.

Some companies focus on low premiums prices to attract customers, then they fight to not have to pay their customers when there is a claim.  A little research on the internet will go a long way in helping you determine how the claims experience is for different companies.  Most purchasers fail to examine this component of their coverage.  This is the difference between a cheap blah tasting apple and that succulent full flavored apple.

Overhead
This includes things like buildings, utilities, some staff, and regulatory compliance.  A well-managed company can keep these costs down.  These enables them to provide more value to you.

Conclusions:

  1. Next time you pick an insurance company look at the entire picture.
  2. Ignore cute lizards, cavemen, and annoying spokespeople.
  3. Research the customer opinions on their claims process.
  4. Determine their corporate structure.

I choose to mostly work with independent agents (although I have several properties insured through a captive agent with Kentucky Farm).  I also prefer to work with well-managed mutual companies (such as Kentucky Farm and Hastings).

Question:

Are you an agent… Give me your opinion in the comments below.

What are your experiences?  Tell us about it.  Help the rest of us make a more informed decision.

Facebooktwittergoogle_plusredditpinterestlinkedinmail Read More

Should I keep a mortgage for the tax deduction?

Posted by on Mar 23, 2013 in Perfect questions, Personal Finance | 2 comments

Should I keep a mortgage for the tax deduction?

How big is the Mortgage interest deduction?Home

We often hear, “you should keep a mortgage on your home for the tax deduction.”  I am going to explore this statement, by using actual numbers from a tax return I prepared.

Ed and Daisy (names changed to protect innocent and guilty) are married with 3 children with an AGI of $99,318. They itemize deductions (pre 1986 referred to as long form) rather than take a standard deduction.  Below is a list of their itemized deductions.

Deductible medical expenses $0
State income tax paid $4,542
Real estate tax paid $583
Other personal property tax $383
Mortgage interest paid $7,010
Mortgage insurance premiums $520
Charitable contributions $223
Misc deductions $0
Total Itemized deductions $13,261

Ed and Daisy deducted $13,261 from their taxable income.  If they had not itemized, they would have only been able to take the standard deduction of $11,900.  Oh wait, they would have still had $11,900 deducted if they had not itemized!  So the real deduction gained from them itemizing was the difference between the standard deduction and their itemized deductions.

Itemized deduction $13,261
Standard deduction $11,900
Increase in deduction from Itemizing $1,361

So Ed and Daisy spent $7,010 on mortgage interest and only received a deduction of $1,361.  They are in the 15% tax bracket.  This means they saved $204 by itemizing.  They gave the bank $7,010 and saved $204 on their tax return.

Anyone who tells you to have a mortgage for the tax deduction doesn’t understand math.  I understand buying a home and using a mortgage to finance it.  I have a small mortgage on my home.  Don’t buy a home to save on taxes.

We buy a house to turn it into a home filled with love and laughter. Not to save on taxes.

 

 

Facebooktwittergoogle_plusredditpinterestlinkedinmail Read More

What is your Price?

Posted by on Feb 2, 2013 in Character Development, Finding Destiny, Perfect questions | 3 comments

What is your Price?

What are your morals worth?

What type of woman do you think I am?

What type of woman do you think I am?

A wealthy man walks over to this extremely beautiful woman.  The man asks her if she would have sex with him for $1,000,000.00?  She quickly answers “yes”. Then he asks her if she would have sex with him for $2.00?  She promptly slaps him across the face and asks “What type of woman do you think I am?” He replies “we already determined that, now we are just negotiating on price.

 

What is the price of your integrity?

While in college I worked at a variety of bars as a bouncer.  In every location I became the one who checked ID’s at the door.  I was paid to protect the owners liquor license by keeping those under the age of 21 from entering the premise.

ID please!

ID please!

Bouncers are notoriously corrupt, often a $20 bill will allow you to cut the line. $20 to $50 will get you in underage. Engaging a bouncer in licentious behavior will get you and your under underage friends in the door.  I tended to be the exception.

The girls I dated that were under 21 knew they wouldn’t get into the bar where I was working.  My friends knew they could NOT come in, if they were underage.   I never did get repeat bribes. I accepted their money as a tip.  Then, explained that they were still unable to enter the establishment.

Perhaps, They just wanted to tip me for doing such a good job?

What is the price of friendship?

I remember as a kid I stole a baseball card from a friend (it was worth $0.10).  I did it because I could.  I took advantage of his trust in me.  I still regret that action to this day.   If I ever see him again, I will confess.  Then, pay him for that 1989 score card of Kevin Bass(plus interest).

“I took advantage of his trust in me.”

That persistent feeling constantly encourages me to always value relationships over material things.  If my friend and I are unsure who purchased a particular item, I quickly defer ownership.  A $12 tool isn’t worth a priceless friendship.

  • What are your morals (or core values)

  • Are they for sale?

  • At what price are you willing to change your morals?

 

Facebooktwittergoogle_plusredditpinterestlinkedinmail Read More